Browsing October, 2012

Market information systems (MIS) have become a very hot topic in development circles, with a wealth of private and public initiatives to bring market prices to farmers in developing regions via mobile phones. I am very intrigued and very curious about them, partly because in my fieldwork with smallhold farmers in rural China I have never encountered anyone using MIS, nor I have really seen a reason for anyone to use them, since prices are widely known, and markets are (or aren’t) accessible for reasons that go well beyond prices. China might be an unusual case, because of its recent history and because of the government’s heavy involvement in agriculture, but still, I did wonder how such systems would be deployed in other countries, what needs they fulfilled, and how they were taken up by farmers.

So it was with great interest that I recently attended (at 6am!) a webinar organized by GSMA – Mobile for Development (GSMA is the global association of mobile phones operators) titled “Mobile Market Information Systems for Farmers: Requirements for Success.” It was a very useful introduction to the state of MIS in a number of African countries, and, as all good presentations, it raised more questions than it answered. The slides used for the webinar are posted on the GSMA website, but here are some of the highlights from my notes.

What exactly are MIS? John Zoltner, director of the Information Technology Applications department at the non-profit organization fhi360, defines them as tools to “increase market transparency to increase revenue for smallholder farmers, lower transaction costs for traders, lower cost of goods for consumers.” The added bonus, especially in countries without efficient data gathering processes, is that it “allows governments to track trends in availability of food commodities to create policies or react to shortages.” (see Zoltner’s slides). Transparency of markets was a common theme, explicitly or implicitly, in all the presentations: the starting point of all these projects is that smallhold farmers often do not have access to information that could help them decide what to grow, where to sell, and whether the price they are getting for their crop is fair or not.

And who wouldn’t want more transparent markets? In many countries, agriculture is still the most important economic sector, and any improvement in this field results in improvements in the quality of life of many people. Early efforts to improve agricultural markets through technology were based on radio, faxes, and email. Current MIS are based on a mix of web platforms and mobile phones, which can provide more timely and sophisticated data and analysis, as well as personalized information. Pilot deployments of MIS are taking places in several countries. For example, Robert Turner from ACDI/VOCA Malawi presented the case study of Esoko Malawi, a private-public partnership started in 2011 with USAid funding. ACDI purchased the Esoko web SMS platform, which provides both the technology and the methodology to run a MIS. ACDI/VOCA targeted smallholders, and selected 13 markets that are important production areas in Malawi. By the end of 2011, about 4,000 farmers were receiving prices of staple crops (ground nuts, maize, beans, important because the project focused primarily on food security). The mechanics of how Esoko works are very interesting: ACDI/VOCA started by gathering information about local units of measure used at each market, the converted them to prices per kilogram. Enumerators collect prices from multiple vendors (at least five in each market) and then use the most quoted price as the price of reference to upload to a web platform via mobile phone. After the prices are uploaded, an administrator looks at them to check for outliers or anything that looks unusual. If everything seems in order, the screen is approved and prices are sent out to subscribers; if there are questions, enumerators are contacted, and if their answers don’t clarify the situation, there are key informants who can double check what is going on in each market.

Assessing the impact of MIS is not easy. Turner recognized that the commercial value of the information they were gathering through Esoko was not clear, and that it was hard to predict whether such systems would be sustainable. Given the cost of running MIS (which vary considerably depending on the type of information, languages used, etc; we heard figures from US $30,000 to 70,000, although it was not clear whether these were running costs, set-up costs, or how they were divided between technology and administration costs, etc), they would have to reach an enormous number of subscribers, each paying very small amounts, to make the service viable. Andrew Kizito, a professor at Makerere University in Uganda, discussed the impact of MIS in Mozambique, pointing out that there are several factors that influence whether people receive market information and how actionable such information is: owning a radio or having a cell phone network in the village are clearly necessary ‘infrastructural’ steps to receiving prices, and having access to roads with public transport is necessary to make such information actionable. He found that receiving market information prices had a positive impact on market participation and on the prices farmers got at the market, but his recommendations focused on targeting farmers associations, NGOs, and government officers (all ‘middlemen’) as clients for MIS, rather than individual farmers. Shaun Ferris of Catholic Relief Services talked about the requisites needed for a successful MIS: it has to be valued by the targeted audience, needs to be well promoted so people understand it and know how to get value from it, can easily scale, and provides a multi-channel approach that is easily up-gradable.

Two points that were raised over and over were that marketing of MIS is not only about letting users know about them, but also educatingthem on how to get value from the information they receive; and that MIS should be part of a bundle of services, that might include weather information, market intelligence, agricultural advice, etc.

And here is my main question about MIS: prices are relatively easy to gather and to process with existing interfaces. Other information, such as localized weather forecast, or brokerage services, are much more complicated to set up if there isn’t already some kind of infrastructure in place. And yet, what if this is the information that farmers really need, rather than prices? What if in the bundle of services, prices are in fact the least important one? In China, farmers know about prices. What they pay for is a daily SMS with localized weather forecast, which is something that they can act upon immediately. So far, MIS seem very much offer-driven, rather than demand-driven. The presenters didn’t mention farmers’ needs, or even farmers’ lives and practices in a contextualized way. Do traders provide farmers with credit, for example, like fish traders in Uganda? What kind of regulations or state interventions exist in the various countries, that influence farmers, fishermen, traders behaviors? In China, the government sets minimum procurement prices for certain crops. These prices are widely known (through tv, radio, newspapers, word-of-mouth, agricultural extension workers, traders, markets, and – last and least, for farmers anyway – websites), and many farmers prefer to grow crops with a lower but safe income that is guaranteed by the state to those that could give them potentially higher, but certainly riskier, returns. At the end of his presentation on Malawi, Turner mentioned that the government sets prices for certain crops in part to protect from exploitation farmers who wouldn’t know what is a fair price for their crop. He went on to suggest that it might be cheaper for the government to support MIS so that farmers are aware of the going prices, rather than setting prices centrally. But doesn’t this mean that the government switches its indirect support from farmers to Esoko, enumerators, NGOs and all the ‘middlemen’ involved in creating and supporting MIS?

Farmers might end up with more knowledge and information about prices and crops, but also with the added burden of increased risk. Is this the goal? It might be – maybe in a context of ‘modernizing’ agriculture, of supporting economies of scale and collaboration among farmers, and of decreasing the total number of smallholders. But how are risks and benefits redistributed when MIS take the place of existing practices – or do we even know enough about existing practices to invest heavily on MIS rather than, for example, on supporting agricultural extension workers? Maybe the next mAgri webinar will answer some of these questions…

M-BANKING IN THE DEVELOPING WORLD

Imagine you have just migrated from the state of Bihar to the glamorous, full of promise, chaotic capital of New Delhi. You have moved so that you can earn more money and therefore, provide a better life for your loved ones. But how do you send this money back home? Often there are informal systems that involve trusting your precious money over to a friend, a friend of a friend, or possibly even a stranger, who will be travelling back to your home village or town. Sometimes they may do this for you without a charge, but more often than not, this service will cost you. And once your money has been dispatched with your messenger, so to speak, you will wait for a few days, a week, to call home and check if the money ever made it to its destination or not. This method involves a substantial time lag between sending and receiving money which may seem inordinate given the inherent risks associated with the informal system. Formal options for the transfer of money do exist but are expensive and therefore not very popular.

Mobile banking is a type of branchless banking that leverages the mobile phone as a platform over which financial transactions, especially remittance transfers as current trends indicate, may be conducted. Mobile banking as a transformational platform in unserved regions has generated a lot of buzz in the technology and development world, with Kenya’s M-Pesa being presented as an ideal, although its success has not quite been fully replicated (this has been attributed to certain economic, social and political factors, as well as Safaricom’s unique position within Kenya). Remittance transfers over the mobile phone are immediate, convenient and comparatively inexpensive. In the development context specifically, mobile banking solutions have a human interface, or agents, as they are known as more commonly.

TELECOM-DRIVEN VS BANK-LED M-BANKING MODEL

During the course of my research over the past two years, I had the opportunity to appraise two different types of M-banking models: a telecom-driven model in Uganda and a bank-led model in India. This basic distinction implicates the primary stakeholder that owns the complete operational process, and whose brand is typically dominant (Porteous, 2006). The different types of models also determine who exactly the agent in the system will be, and what entity will select specific individuals as agents. In a telecom-driven model, as in Uganda (and also the massively popular M-Pesa in Kenya), the agent is usually a small shopkeeper who sells airtime (and more often than not, a range of other products), and who is certified as an M-banking agent by a process unique to that particular telecom company. In this case, the telecom company’s brand is dominant. In the bank-led model in India, a Technology Service Provider (or TSP) may become a banking correspondent for the banks (Ghosh & Bajpai, 2012), who then source and recruit their own agents. These agents are similar to the ones observed in Uganda, in that they are usually shopkeepers who sell airtime amongst other products. However, they are certified as agents to handle cash-in/cash-out activities by the TSP directly. Therefore, these agents will be representatives of the TSP and not the bank, although they are still selling the bank’s financial services. Interestingly, in this case the bank’s brand is dominant, although the agents as the TSP representatives must display their brand as well.

BUT WHO DO WE TRUST?

Typically, when agents are recruited (both in Uganda and India), the longevity of their business is taken into account. Therefore, agents are often longstanding members of their immediate communities. Their customers will know them well, sometimes for years. In this case, the customers trust the agents directly, rather than the telecom company or bank, and will therefore be willing to transact with the M-banking solution. In certain cases, customers will even be willing to keep their money on hold with the agents until their transactions are completed at a later time, without any formal receipt. However, in cases where customers are not acquainted with the agent directly, it is highly possible that the telecom company or bank led them to the M-banking service. This can be through direct or indirect marketing techniques, or through referrals where a bank may offload customers directly to the M-banking solution to ease up the traffic at their branches. Therefore in these events, the brand of the telecom company or the bank will impact the decision of a consumer to approach an unknown agent and trust him or her with their precious money.

For one-time financial transactions such as remittances or bill-payments, consumers may test the reliability or trustworthiness of the M-banking solution by remitting money or paying a bill one time. If the transaction goes through, the consumers will begin to trust the system and conduct future transactions. In this case, consumers will be driven to try the M-banking financial service for the first time by the brand associated with the service (MTN in Uganda or SBI in India, for instance), or by the influence of a familiar agent. However, whether or not they continue to trust the system will be governed by the success of that first transaction. On the other hand, for transactions that require a continued relationship with the financial solution such as transactions with formal bank accounts (savings or current) do, the brand of the telecom company or bank will impact the consumer’s decision to sign up and, more importantly, stay invested in the system. The acquaintance of an agent may lead potential customers to sign up for a bank account, but it is unlikely that they will continue to transact with this M-banking solution unless they believe in the brand administering it.

WELL-REGARDED (Telecom or Bank-Institution Brand)

NOT WELL-REGARDED (Telecom or Bank-Institution Brand)

WELL-REGARDED (Agent Brand)

A potential customer will be willing to perform both one-time transactions (such as remittance) as well as long-term transactions (such as savings)

A potential customer will be willing to sign up for the service.

For one-time transactions, the new user will test the service by conducting the first transaction with a small amount of currency. If the service obliges, the customer may continue using it.

For long-term transactions, the new user will sign up but it is unlikely that they will continue to transact unless they believe in the telecom or bank brand administering the service.

NOT WELL-REGARDED (Agent Brand)

A potential customer will sign up and may stay invested in the service on the basis of the faith they have in the telecom company or bank administering the service.

It is unlikely that a potential customer will use the service.

For one-time transactions, the new user may test the service. If the first transaction is successful, they many continue using it.

It is highly unlikely that the customer will keep their money invested in a long-term transaction.

FURTHER READING

Porteous, D. 2006. The Enabling Environment for Mobile Banking in Africa. Department for International Development Report.

Ghosh, I., and Bajpai, K. 2012. A Case Study on the Business Correspondent Model in India: Technology Service Providers as BCs. World IT Forum (ifip), New Delhi, India.

Ghosh, I. 2012. The Mobile Phone as a link to Formal Financial Services: Findings from Uganda. The Fifth International Conference on Information and Communication Technologies and Development (ICTD2012). Atlanta, Georgia USA.